TMI Blog1978 (6) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... r occasion. We allowed the application and directed that the matter be reheard. The reference has accordingly come on before us for re-hearing. The question of law sent up by the Income-tax Appellate Tribunal, Cochin Bench, for our determination is: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that Rs. 23,689 which represents the difference between pound 4,585 and pound 4,352 (converted into rupees) which was considered as income by the U.K. income-tax authorities for the U.K. assessment year 1964-65, was not the income of the assessee under the I.T. Act, 1961 ?" The assessee, an individual, having income from salary in India, also received dividends from M/s. Peirce L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as benefit accrued to the assessee for purposes of taxation. On appeal to the AAC, that officer agreed with the assessee that the dividend in question would not amount to ail income for the assessee, as it was diverted at source. But as the assessee actually received a benefit, in respect of such deduction, the value of such benefit would be the income of the year. This benefit was the amount of refund received. He, therefore, directed that an amount equal to the refund received should be treated as assessable in the assessment year. On further appeal to the Tribunal, at the instance of the department, the Tribunal took the view that for the purpose of the I.T. Act in the United Kingdom, the tax deducted was income, but in order to cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on like s. 18(5) of the Indian I.T. Act, 1922, in the United Kingdom statute, and referred to the provisions of ss. 169, 184, 185, 186, 199, 350 and 493 of the English Act. Numerous decisions rendered with respect to the provisions of the English Act were also noticed, and their line of reasoning was discussed. For instance, in Blott's case [1921] 8 TC 101 (HL), it was stated that it was not correct to regard a company paying income-tax on its profits as doing so as agent for its shareholders; that it pays as a taxpayer; and that if dividend is declared, the company is entitled to deduct from such dividend, a proportionate part of the amount of the tax previously paid by the company; and that in that case, the payment by the company operate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eared before us, has levelled a powerful attack against the line of reasoning disclosed by our earlier judgment. Arguing basically with reference to the provisions of the I.T. Act, 1961, he invited our attention to s. 5 of the Act, which provides for assessment of the income of an assessee, from whatever source derived. The section, so far as it is material, reads: "5. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which-- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year under this Act ......... :". With reference to these provisions, counsel for the assessee squarely raised two important contentions: First, that in respect of the dividend from Indian companies dealt with in s. 194, s. 198 contains a specific provision that they shall be deemed to be income receipts. It was emphasised that there was no such similar deeming provision in respect of dividend received from a foreign company. Secondly, that the provisions of s. 5(1)(c) of the I.T. Act, 1961, contemplate and permit taxation only of actual receipts and not deemed receipts; viz., it contemplates assessment of income which accrues or arises to the assessee outside India during the year in question and not income deemed to accrue or to ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... responds to s. 198 of the 1961 Act. There is no provision in the 1961 Act corresponding to s. 16(2). After noticing the scheme relating to the grossing up of the dividends, the learned judges observed: " If this scheme is borne in mind, then it is clear that both the AAC and the Tribunal were right in coming to the conclusion that the amount of tax paid in respect of the dividends in the United Kingdom has no hearing whatever as far as ss. 16(2) and 18(5) are concerned. And unless the Commissioner satisfies us that this case falls under some provision of the I.T. Act, no grossing up would be permissible at all. If the only section which permits grossing up is s. 16(2), then, as pointed out, under that section the grossing up call only be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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